MCQs F9 Revision 03/2025 buổi 15 (22/02/2025)

A company has 15% $100 nominal value irredeemable loan notes in issue. Investors currently require a return of 12% on loan notes of this class of risk.

If the corporate tax rate is 35%, what is the cost of the loan notes to the company?

• 7.80%

• 9.00%

• 9.75%

• 11.25%

Answer explanation

The cost to the company is the after-tax cost of debt = Pre-tax cost × (1 − corporate tax rate) = 12% × (1 − 0.35) = 7.8%

A company has in issue loan notes with a nominal value of $100 each. Interest on the loan notes is 6% per year, payable annually. The loan notes will be redeemed in eight years' time at a 5% premium to nominal value. The before-tax cost of debt of the company is 7%

per year.

What is the ex interest market value of each loan note?

• $94.03

• $96.94

• $102.91

• $103.10

Answer explanation

Market value = (6 x 5.971) + (105 x 0.582) = 35.83 + 61.13 = $96.94

Bilbo Co is an unlisted company with 800,000 Issued shares. Seema is one of the founders and owns 20% of the issued shares.

Bilbo Co has just paid its annual dividend of $0.30 per share. It is expected that next year's

dividend will be $0.32 per share. After that it is expected that dividends will grow indefinitely at 2% per year.

Shareholders expect a 12% return from their investment.

Using the dividend valuation model, calculate the value of Seema's shareholding.

• $512,000

• $522,240

• $489,600

• $480,000

Answer explanation

The value of next year's dividend has been given, so the share price calculation is:

Share price = D1 / (re - g) = 0.32/(0.12 - 0.02) = $3.20

Seema's shareholding is 800,000 x 20% = 160,000 shares

The value of this shareholding is 160,000 × $3.20 = $512,000

Incorrect answers often incorrectly added growth of 2% to the given dividend figure of

$0.32 to get an answer of $522,240.

Fernwell wants to buy shares of Gurst Co in two years. Fernwell uses the dividend valuation model with an assumed dividend growth rate of 5%.

If Fernwell’s discount rate is 10% and Gurst has recently paid a dividend of $20 per share, what is the price per share that Fernwell will pay?

• $400

• $420

• $441

• $463

Answer explanation

The share price after two years will be the present value of the expected dividend from year three onwards.

D3 = $20 × (1.05)^3 = $23.15

P2 = $23.15/(0.10 − 0.05) = $463

Which of the following are possible reasons for estimating the market value of a private company’s shares?

• To comply with International Financial Reporting Standards

• To set a guide price in an Initial Public Offering

•  To allow the company’s return on equity to be calculated

• To set a guide price for a scrip issue of shares

Answer explanation

The bank advising on an IPO would need to value the company’s equity to set a realistic guide price for the share issue.

IFRS reports the carrying amount of equity not its market value. Return on equity is calculated by dividing net income by the book value of equity. A script (bonus) issue is an issue of new shares to existing shareholders for zero consideration, so market price is irrelevant.